Monday, May 16, 2011

Who is blocking high-skilled immigration?

One native-born American, one (very) high-skilled immigrant.

There is a puzzle in the American political economy that has me utterly baffled. Readers and fellow bloggers, I need your help to solve this puzzle. The question is: Who is the constituency holding back high-skilled immigration to the United States?

Few economists would argue that high-skilled immigration is not an undiluted positive for the American economy. In fact, it is one of the only sources of "low-hanging fruit" (as Tyler Cowen would put it) that we have left. Here's Annie Lowrey:

But maybe there remains one last shiny, fat apple hanging right in front of our faces, one last endeavor that would bring us fast, costless, and easy growth. It is immigration reform. The United States can grow faster by stealing the rest of the world's smart people.

[F]oreign-born entrepreneurs were at the helm of a full quarter of Silicon Valley start-ups founded between 1980 and 1998—start-ups like, say, Google. In 1998 alone, those companies created $17 billion in sales and accounted for 58,000 jobs.

Since then, the contributions of highly skilled immigrants—let's call them super-immigrants—have only grown...25.3 percent of engineering and technology start-ups opened between 1995 and 2005 had a foreign-born founder...Immigrant-founded companies across the country produced $52 billion in sales and employed 450,000 workers...[I]mmigrants are 30 percent more likely to start a business than U.S.-born citizens. Immigrants with college degrees are three times as likely to file patents as the domestically born...Economist Jennifer Hunt of McGill estimates that the contributions of immigrants with college degrees increased the U.S.'s GDP per capita by between 1.4 and 2.4 percent in the 1990s.

For some reason, though, there exists a vast thicket of U.S. policies and practices that keep high-skilled immigrants out. H1-B visas are temporary, severely limited in number, and annoyingly hard to get. Our student visa program kicks foreign students out right after they finish. The number of "employment-based" green cards is capped at 140,000 a year, which heavily tilts our immigration policy toward family reunification and away from high-skilled immigration.

It goes without saying that this is nuts. By keeping these people out, our nation is shooting itself in the foot with a sawed-off shotgun.

But this raises a huge, looming question: Who or what is behind this insanity? Usually, when economists see such a gross and persistent miscarriage of policy, we look for a vested constituency that has successfully used the political process to block national efficiency in order to favor its own narrow interest. But, for the life of me, I can't figure out who is against high-skilled immigration.

It doesn't appear to be the political far right. Tea Partiers and the like are up in arms about immigration, but all of their animus is directed at low-skilled immigrants, particularly Mexicans. They are not marching in the streets or joining Minuteman squads because of Indian computer programmers.

Nor is it business conservatives. Check out this Wall Street Journal article by Jonah Lehrer, which basically echoes Lowrey (yes, I view the WSJ as a barometer of business-conservative opinion). Or read AEI calling for reform of our high-skilled immigration policy. After all, high-skilled immigrants are a huge boon to American business, which is why tech companies are always lobbying Congress (unsuccessfully) to increase the number of H1-B visas.

It isn't libertarians. Libertarians favor (relatively) open borders.

It doesn't seem to be the political left. Observe this article by David Altman in the Huffington Post, which used the term "super-immigrants" months before the Lowrey article, and basically says the same things (yes, I view the Huffington Post as a barometer of elite-liberal opinion). Liberals, after all, tend to favor a multicultural society. They also favor income equality, which high-skilled immigration tends to promote. Maybe Democrats are afraid that the children of entrepreneurial immigrants will vote Republican, but in recent years Asian-Americans have trended Democratic.

Is it the security state? Yes, the influx of foreign students and workers dropped off after 9/11, but has since recovered. It seems conceivable that the DHS and other arms of the security apparatus are paranoid about smart terrorists or Chinese spies. But I have not heard of the DHS lobbying to keep out high-skilled immigrants. Is this happening?

What about high-skilled native-born Americans? Are American-born computer programmers, engineers, and entrepreneurs afraid that high-skilled immigrants will take their jobs? I guess this is conceivable. I've heard some low-level grumbling from American-born engineers about the low wages and long hours that immigrant engineers are willing to accept, but I know of nothing even slightly resembling an organized movement or lobbying effort. And my guess is that smart Americans are smart enough to know that it's a positive-sum game - that the positive impact of the businesses started by smart immigrants vastly outweighs the effects of wage competition.

So who is it? Is there someone I'm forgetting here? Have I made a mistake in my analysis? Or is my instinct wrong - is it simple blind dumb institutional momentum, and not the diabolical actions of any special interest group, that is keeping world's geniuses shivering outside our tall iron gates? Is it simply that no one is paying attention? Help me out here, people. Help me understand why we have not yet picked this lowest of low-hanging fruit.

Update: E.G. at The Economist has an excellent post comparing Canada's attitude toward high-skilled immigrants to America's. All of the commenters who wrote that "we have enough smart people already" should read it.

Agreed wholeheartedly. In my experience (and I have some, now!) this is just not the issue people are worrying about. They're worrying about unskilled labor and the effect of illegal entry and employment of unskilled immigrants - or about how to give those people legal status and stop exploiting them as an unseen underclass. This is simply not where the fight is because people don't see it as urgent. I'd hazard a guess it's because when most people think "immigration," this isn't the issue that comes to mind: immigration and the economy just invokes a different conflict for most people. It's more about the tribalism issues you talk about so often; people have an emotional reaction to immigration that has everything to do with "us" and "them," and nothing to do with the skilled immigration population's potential effect on the economy. After all, right now, people aren't terrified that the population of the US is going to be more Chinese or Japanese or Indian than white - but they are afraid of a hispanic invasion. *shrug* Anyway, that's what I think - this isn't the topic that makes racists angry, so it just doesn't get as much attention.

The most obvious group that would prefer less immigration to the USA of highly skilled/educated workers would be the governments of the countries these highly skilled workers are coming from. After all, they stand to lose the investment they have made in educating them.Not seeing much evidence of this though.

Dean Baker: "In 1997 Congress tightened the licensing rules for foreign doctors entering the country because of concerns by the American Medical Association and other doctors' organizations that the inflow of foreign doctors was driving down their salaries. As a result, the number of foreign medical residents allowed to enter the country each year was cut in half."http://www.conservativenannystate.org/cns.html#2

Well, at least in the case of doctors, there does seem to be some special interest groups lobbying against high-skilled immigration.

As someone who did a phd in physics, I can tell you that wage competition with foreign scientists is ABSOLUTELY outweighing any benefits to scientists that comes from business growth. There is a reason that so few US citizens get phds- its long hours and tremendously low pay.

There is almost certainly benefits to the economy as a whole, but for US scientists, the negative effect from wage competition has been pretty huge.

I am not a protectionist, but opening the border to high skilled immigrants will impact high skilled US workers. Its disingenuous to present it as a win-win. Most people win at the expense of the high skilled worker.

The answer to this question is, as you will see, is hiding in plain sight.

The question is, who has the POWER to restrict high skilled immigration, not who is hurt by it.

And the answer is obvious. It is business. Programmers, researchers, etc are, relative to business, an inconsequential political force.

Why does business want to restrict high skilled immigration? That becomes clear if you put it another way: what is the means by which business get high skilled workers in domestic settings for the LOWEST price?

Again the answer is obvious: temporary visas. Business has shot its wad on H1-B and similar (temporary) visas. The point absolutely is to gain access to foreign skilled labor, but if that labor gets a green card, then the costs raise dramatically. So they don't push for it. Yes, they may occasionally whine about this immigration issue, but money is spared, if you know what I mean. On the other hand, money is thrown liberally at the H1-B authorization, every year, year after year.

I wonder about economics education, if you even needed to ask this question. You are clearly a bright fellow.

I suggest, as a supplement to your studies, you watch the C-SPAN hearings on H1-B renewals and caps.

"As someone who did a phd in physics, I can tell you that wage competition with foreign scientists is ABSOLUTELY outweighing any benefits to scientists that comes from business growth"

But wage competition is supposed to be a benefit itself. Who doesn't want cheaper scientists? Who doesn't want cheaper doctors?

"I am not a protectionist, but opening the border to high skilled immigrants will impact high skilled US workers. Its disingenuous to present it as a win-win. Most people win at the expense of the high skilled worker."

It benefits low skilled workers. They get cheaper professional services. They pay less for lawyers, doctors, accountants, etc

Note that the H1B system (while having lots of problems) carries benefits - highly-skilled workers tied to their employer.

BTW, Noah: "Few economists would argue that high-skilled immigration is not an undiluted positive for the American economy. In fact, it is one of the only sources of "low-hanging fruit" (as Tyler Cowen would put it) that we have left."

I'm going to turn this around. Why would we want high skilled immigrants? Two answers suggest themselves.

1) We don't have enough high skilled natives.2) Immigrants inherently bring something to the table that natives lack.

Am I missing anything?

Can 1) possibly be true? If it is, then we need a better education system. As it is, though, education is a primary target of republican and austerian attack. Bodes ill for the future.

2) can possibly be true. Immigrants might self-select for traits like drive, initiative and risk taking. Still, I would think that a significant number of natives rising from the underclass might be above average in these characteristics (we'd only need about 200,000 per year to match the H1b quantities) - but this can only be realized if they have opportunities. Access to education is primary, but reread point 1).

I am absolutely neutral on the subject of high-skilled immigration. But I really have to wonder why any rich, powerful country would have it as a pressing need.

I am thinking along the lines of Jazzbumpa. Why can't the richest country on earth produce the needed high skilled workers? Seems like we have enough people and enough schools to make the needed output. I am not against immigration of the high skilled - how could I as I lived most of my working life in Silicon Valley? My friends and co-workers are members of this group.

Obviously, doctors and scientists. The argument for high-skilled immigration is that helps most at the expense of the few.

Also- a question I don't see addressed often is who is capturing the gains? If an influx of cheap labor reduced pharma research costs, how much of the end cost gets passed to the consumer and how much is claimed by shareholders?

@ minka - the only additional cost with a 'greencard' over an H1B is the actual sponsorship cost, which is c. $15-20K for a greencard and c. $5-7K for an H1B (these numbers include processing and legal fees). labor costs do not rise. i speak from direct experience having worked at companies that have sponsored employees for each type of visa.

Interesting question. I think the answer is yes, but very hard to quantify, and not constant over time, depending on economic swings.

Frex: if everyone is a nuclear physicist, who's going to wrap fish?

If college graduates are forced to go home and live with mom and dad, then we have more trained people than the economy can use. This has been the case here for several years. Maybe they are trained in the wrong things, though. If so, that suggests that there should be a reasonable plan for corrective action, if anyone cares to develop it.

But in my part of the world, engineers and computer programmers end up working for contract houses more often than as direct hires by a company that actually makes something.

I think it would be quite hard to make a convincing case that this country is suffering from a high skill shortage.

The idea that immigrants constitute "cheap labour" is not true. Firstly, the law states that H1B holders must be paid the same wage a US citizen would. Secondly, the idea that companies are hiring immigrants because they costs less is, in my experience, nonsense. Companies in human capital-intensive industries (e.g. finance, software development) want to hire the best people possible. If they're foreign, so be it. Hiring foreigners costs more, not less, because of the requirement to pay processing and legal fees. Note the law explicitly forbids passing these fees on to the employee.

Further, I will posit that making yourself good by making someone else less so is ultimately a loser's game.

And I sincerely hope Noah agrees with me, not you.

@ Stone -

Cute, but you responded to the throw away line in my post, and ignored the meat. The simple fact is that engineering (frex) used to be a career. Now it's a job. With a contract house. It's moving in that direction for M.D.'s as well.

I don't have any reason to think we're suffering from a skill shortage here.

@ JazzBumpa: "I don't have any reason to think we're suffering from a skill shortage here."

you're missing the point. as i wrote in a previous comment, "Companies in human capital-intensive industries (e.g. finance, software development) want to hire the best people possible. If they're foreign, so be it"

the idea is not to hire a "skilled" person. the idea is to hire the best person for the job.

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